Asian equity markets were mostly higher as the region sustained the momentum from Wall St with the S&P 500 back above 3000 and the DJIA above 27k

·        US President Trump has delayed the next round of tariffs on USD 250bln of Chinese goods to October 15th from October 1st

·        Global Times noted comments that the postponement does not mean a big improvement as talks remain tough

·        UK Operation Yellowhammer papers have revealed that public and business readiness will be at a low level

·        Looking ahead, highlights include German & French CPI (Final), EZ Industrial Production, US CPI & Initial Jobless Claims, ECB & CBRT Rate Decisions, IEA Monthly Oil Report & JMMC Meeting, supply from Italy & US

ASIA-PAC

Asian equity markets were mostly higher as the region sustained the momentum from Wall St where US-China trade concessions fuelled the S&P 500 past the 3000 milestone and the DJIA back above 27k after China announced a tariff exemption list on imports from US, while US President Trump reciprocated by delaying the next round of tariffs on China to October 15th from October 1st. ASX 200 (+0.2%) and Nikkei 225 (+1.0%) were higher with support seen across the trade sensitive sectors in Australia although energy suffered amid recent losses in oil, while the Japanese benchmark was underpinned by a weaker currency and following better than expected Machine Orders data. Conversely, Hang Seng (-0.2%) and Shanghai Comp. (+0.2%) were mixed despite the encouraging trade developments as some suggested China’s olive branch could be to ease pressure from its weakening economy. The US delay of the tariff increase to 30% from 25% on USD 250bln of Chinese goods was also said to have left some dissatisfied in which Global Times noted comments that the postponement does not mean a big improvement as talks remain tough, while it was also suggested that the delay is far from enough and some called for a removal of the extra tariffs. Furthermore, the downside in Hong Kong was led by the blue-chip energy names and a slump in HKEX after its recent GBP 32bln proposal for LSE which could ultimately be rejected amid doubts regarding political risk and the deal structure. Finally, 10yr JGBs initially declined amid the improvement in trade relations and after similar pressure in USTs as yields rebounded, but later rebounded as support near 154.50 held and amid the BoJ presence for JPY 680bln of JGBs in the belly to super-long end.

PBoC skipped open market operations for a net neutral daily position. (Newswires)

PBoC set CNY mid-point at 7.0846 vs. Exp. 7.0929 (Prev. 7.0843)

US President Trump announced to delay next round of tariffs on USD 250bln of Chinese goods to October 15th from October 1st. Reports later stated that China considers US farm imports as goodwill before talks. (Newswires/Twitter)

Senior Chinese diplomat said China cannot be deterred in anti-poverty efforts and long-term growth strategy even amid talks, while the diplomat suggested China won’t make any compromise even on promising to eliminate IP theft as it would stall growth. (Fox)

China Global Times tweeted comments from Chinese Academy of Social Sciences expert Gao that delaying tariffs may show US side's goodwill but does not mean trade talks have achieved a big improvement as talks remain tough. Global Times also tweeted comments from Chinese Academy of International Trade and Economic Cooperation's Bai Ming that the postponement shows trade relations are very important for both countries and that imposing tariffs is not welcome at all. Bai added that delaying the extra tariffs is far from enough and we cannot praise Trump, only by removing the extra tariffs can he show his sincerity in trade talks and more importantly, we should watch what he has done and what he will do. (Twitter) 

UK/EU

UK PM Johnson said the UK can manage very well without a Brexit deal and that he wants a high wage, low tax economy. PM Johnson reiterated his stance that the backstop is going to be removed and they will not accept a Northern Ireland backstop but will work for a Brexit deal, while he added the UK will leave on October 31st. (Newswires)

Up to 20 Labour MPs might be prepared to defy leader Corbyn and support any revised Brexit deal that PM Johnson is able to strike with the European Union, senior party figures believe. (Times)

UK Government said it will not publish internal messages sent about the prorogation of Parliament, despite being forced to following a vote by MPs and stated the request is "unprecedented, inappropriate and disproportionate". Furthermore, UK Operation Yellowhammer (government's reasonable worst case Brexit scenario) papers have been released which discussed public and business readiness will be at a low level and that the EU would not be nearly as badly affected as the UK, although Business Minister Leadsom will not publish the full details of the No Deal contingency planning despite being ordered to by MPs. (Newswires)

UK PM Johnson has offered Conservative rebels a way back into the party amid a growing split among MPs over his decision to kick them out. (Telegraph)

UK RICS House Price Balance (Aug) -4 vs. Exp. -11.0 (Prev. -9.0). (Newswires)

ECB sources stated the ECB is to cut some growth projections with both 2019 and 2020 GDP expansion seen not far above 1%, while the bank’s projections on headline and underlying inflation is to show slow protracted rise in the coming years. Furthermore, the sources stated that forecasts suggest even with a new round of stimulus, the ECB will struggle to hit its inflation target which it has failed to do since 2013. (Newswires)

Dutch Parliament passed a motion opposing tiered rates for banks and has sent a letter to ECB's Draghi. (Newswires)

FX

The greenback was steady and held on to the prior day’s gains which were attributed to firmer than expected PPI data and a rebound in US 10yr yields, as well as the more constructive US-China trade developments. Furthermore, the greenback’s transatlantic counterparts traded lacklustre as EUR/USD languished near 1.1000 ahead of today’s ECB where there are high expectations for fresh stimulus measures but also fears of potential disappointment given that markets are heavily one-sided, while GBP/USD was also uneventful as the government continued to defy Parliament’s wishes and with UK PM Johnson steadfast in his ‘do or die’ Brexit stance. Elsewhere, USD/JPY reclaimed the 108.00 handle for the first time in over a month after the US-China concessions spurred safe-haven outflows, and CNH also strengthened from the trade developments which in turn underpinned antipodeans due to their China exposure, as well as high-beta characteristics.

COMMODITIES

Commodities were mixed overnight in which WTI crude recouped some of the prior day’s near-3% declines that had been triggered following mixed EIA inventories and downgrade of global demand growth in OPEC’s latest monthly report, as well as a continued unwinding of the geopolitical risk premium as sources noted preparations for a potential US-Iran meeting at the UN. Focus now shift to the JMMC which will include Saudi’s newly appointed Energy Minister Prince Abdulaziz, although his Russian counterpart Novak has suggested there are no plans to discuss deeper production cuts but slowing global demand for oil will be a discussion.

Elsewhere, gold prices were choppy amid an uneventful greenback ahead of today’s ECB and US CPI data, while copper prices coat-tailed on the back of the risk appetite following the improved US-China trade relations.

OPEC countries reportedly fulfilled the OPEC+ deal by a rate of 131% and non-OPEC countries fulfilled it by a rate 147% in August, according to sources. (Tass)

Oman's Oil Minister said there is an appetite among OPEC+ members for more production cuts if needed. (Argus/Twitter)

US House of Representatives votes to ban offshore oil exploration off Florida gulf coast. (Newswires)

GEOPOLITICS

US preparations are underway for a possible US President Trump and Iranian President Rouhani meeting on the sidelines of the UN General Assembly, according to sources. (Newswires) US President Trump said he is not looking at anything when asked if he would meet Iranian President Rouhani and replied we will see what happens when questioned if he would ease sanctions on Iran, while he reiterated that Iran and the US want to make a deal but it's also fine if they don't. (Newswires)

US President Trump previously discussed easing sanctions with advisors on Iran to help secure a Rouhani meeting at UN in which where Treasury Secretary Mnuchin voiced support and former National Security Advisor Bolton argued forcefully against it. (Newswires/Twitter)

Iranian President Rouhani and French President Macron discussed the nuclear pact over the phone in which Rouhani reiterated that the US can join talks if sanctions are removed. (Fars)

US

Fixed Income continued its sell-off on Wednesday, albeit more modestly, with haven demand limited on the back of US-China trade “gestures” and tentativeness ahead of the ECB meeting on Thursday. At settlement the curve had steepened, with yields higher most pronounced in the belly, the 2s10s was 1bps wider, whilst the 10s30s was 1bps narrower. The back-up in yields seen of late is not just confined to the US, it has been global. Analysts note that the rise has been led by real yields, which could be an indication that the market perceives central banks will disappointing in their largesse in the weeks ahead (ECB tomorrow, a package of measures is expected, but recent newsflow has suggested it might not be as aggressive as markets would desire, while the idea of an FOMC 50bps cut has dissipated after Powell's remarks last week). US T-notes (Z9) settled 8 ticks lower at 129-29.

White House said US President Trump has ruled out unilaterally indexing capital gains tax to inflation. (Newswires)